IBR

Philippine business optimism falls

OPTIMISM among senior business executives in the Philippines fell significantly last quarter from a year ago -- and at a rate bigger than falls recorded in Southeast Asia, Asia and the Pacific and globally for the same periods -- according to findings of a quarterly survey by Grant Thornton.

But Philippine readings were still better than those of the region and the world in general.

The firm’s latest International Business Report, whose results were e-mailed to journalists yesterday, was derived from a quarterly survey of chief executive officers, managing directors, chairmen or other senior executives of companies across industries.

Results of the survey were drawn from interviews with senior executives about their optimism over the country’s economy in the next 12 months, said Grant Thornton, an organization of independent assurance, tax and advisory firms.

The percentage of respondents who were optimistic as against those who were pessimistic came out at 56% last quarter, down from 84% in the fourth quarter last year and 86% in 2015’s first three months.

Globally, business optimism dropped to its lowest level in three years -- to 26% last quarter from 36% in 2015’s fourth quarter and from 33% in that year’s first three months. In Asia and the Pacific, confidence level slipped to 21% from 31% for both comparative previous periods, while for Southeast Asia it fell to 26% from 30% and 40%, respectively.

“Much of the sentiment across the region is linked to activity in China and while growth there is still expected to cool, there is a broad feeling that the pace and the extent of the Chinese economic slowdown has not been as bad as feared,” Ma. Victoria C. Españo, chairperson and chief executive of professional services firm P&A Grant Thornton, said in a statement released yesterday.

At the same time, Ms. Españo noted that “when businesses look internally at their own operations, the outlook is much brighter.” She noted that “[d]espite the wider uncertainty, many surveyed firms in the Philippines are confident about their prospects for revenue and employment plans.”

In the Philippines, optimism about revenues was at 66%, showing the balance of those expecting higher sales minus those who saw a decline. The figure is an improvement from 62% in the fourth quarter of last year but still lower than the 74% seen in 2015’s first three months.





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Business executives in the country were also more optimistic about profitability, at 70% against 62% in the fourth quarter and 63% in 2015’s first three months.

In terms of employment, however, confidence slipped to 42% last quarter from 60% in the fourth quarter of last year and 56% in 2015’s first three months.

In terms of selling prices, the net balance (those expecting an increase less those who see a decrease) dropped to 34% last quarter from 62% in 2015’s fourth quarter and from 47% in that year’s first three months.

Asked on growth initiatives their businesses were likely to undertake in the succeeding 12 months, respondents gave as top three options: “improve sales force effectiveness” (80%), “incentive productivity improvements” (78%) and “increase investment in marketing” (64%).

The other areas were: “develop and/or launch a new product or service” (30%), “expand your business domestically” (14%), “access new sources of funding” (6%), “recruit specialist talent” (2%). “Expand your business overseas” and “merge with or acquire another business” both got zero responses.

Grant Thornton said the research “finds that a potent combination of fragile financial markets, volatility in oil prices, concerns over terrorist attacks and political uncertainty” -- that includes prospects of the United Kingdom leaving the European Union and the US presidential race -- has “led to the majority of regions globally reporting a fall in their economic outlook.”

“The message from business across Asia Pacific is that their outlook for the economy has weakened in the last three months. A range of external factors will have played their role, not least the volatility we saw in financial markets in the first quarter which will have knocked sentiment,” Ms. Españo said.

Aside from optimism, senior executives in the Philippines were also asked about how they ranked economic uncertainty on a scale of 1 to 5, where 5 means it is a major constraint. Of those surveyed, 46% placed the level at 4 or 5, compared to 22% in 2015’s fourth quarter and 41% in that year’s first three months. On rising energy costs, 36% said the issue is a major constraint, against 32% in the fourth quarter and 41% a year ago. Exchange rate fluctuations were a lesser constraint, with 32% answering 4 or 5 on the scale, or lower than 34% recorded in the fourth quarter and 45% in the first quarter of 2015.

As published in Business World dated 13 April 2016